ACCOUNTING REFORM AND INVESTOR PROTECTION VOLUME II VerDate 11-MAY-2000 11:39 Jul 17, 2003 Jkt 000000 PO 00000 Frm 00001 Fmt 6019 Sfmt 6019 87708V2.TXT SBANK4 PsN: SBANK4 VerDate 11-MAY-2000 11:39 Jul 17, 2003 Jkt 000000 PO 00000 Frm 00002 Fmt 6019 Sfmt 6019 87708V2.TXT SBANK4 PsN: SBANK4 S. HRG. 107–948 ACCOUNTING REFORM AND INVESTOR PROTECTION HEARINGS BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED SEVENTH CONGRESS SECOND SESSION VOLUME II ON THE LEGISLATIVE HISTORY OF THE SARBANES-OXLEY ACT OF 2002: ACCOUNTING REFORM AND INVESTOR PROTECTION ISSUES RAISED BY ENRON AND OTHER PUBLIC COMPANIES MARCH 5, 6, 14, 19, 20, AND 21, 2002 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( VerDate 11-MAY-2000 11:39 Jul 17, 2003 Jkt 000000 PO 00000 Frm 00003 Fmt 6011 Sfmt 6011 87708V2.TXT SBANK4 PsN: SBANK4 VerDate 11-MAY-2000 11:39 Jul 17, 2003 Jkt 000000 PO 00000 Frm 00004 Fmt 6011 Sfmt 6011 87708V2.TXT SBANK4 PsN: SBANK4 S. HRG. 107–948 ACCOUNTING REFORM AND INVESTOR PROTECTION HEARINGS BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED SEVENTH CONGRESS SECOND SESSION VOLUME II ON THE LEGISLATIVE HISTORY OF THE SARBANES-OXLEY ACT OF 2002: ACCOUNTING REFORM AND INVESTOR PROTECTION ISSUES RAISED BY ENRON AND OTHER PUBLIC COMPANIES MARCH 5, 6, 14, 19, 20, AND 21, 2002 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( U.S. GOVERNMENT PRINTING OFFICE 87–708 PDF WASHINGTON : 2003 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate 11-MAY-2000 11:39 Jul 17, 2003 Jkt 000000 PO 00000 Frm 00005 Fmt 5011 Sfmt 5011 87708V2.TXT SBANK4 PsN: SBANK4 COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS PAUL S. SARBANES, Maryland, Chairman CHRISTOPHER J. DODD, Connecticut PHIL GRAMM, Texas TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama JACK REED, Rhode Island ROBERT F. BENNETT, Utah CHARLES E. SCHUMER, New York WAYNE ALLARD, Colorado EVAN BAYH, Indiana MICHAEL B. ENZI, Wyoming ZELL MILLER, Georgia CHUCK HAGEL, Nebraska THOMAS R. CARPER, Delaware RICK SANTORUM, Pennsylvania DEBBIE STABENOW, Michigan JIM BUNNING, Kentucky JON S. CORZINE, New Jersey MIKE CRAPO, Idaho DANIEL K. AKAKA, Hawaii JOHN ENSIGN, Nevada STEVEN B. HARRIS, Staff Director and Chief Counsel WAYNE A. ABERNATHY, Republican Staff Director MARTIN J. GRUENBERG, Senior Counsel DEAN V. SHAHINIAN, Counsel STEPHEN R. KROLL, Special Counsel LYNSEY GRAHAM REA, Counsel VINCENT MEEHAN, Counsel SARAH A. KLINE, Counsel JUDITH KEENAN, Senior Policy Advisor ALEXANDER M. STERNHELL, Staff Director, Securities Subcommittee LINDA L. LORD, Republican Chief Counsel STACIE THOMAS MORALES, Republican Economist MICHELLE R. JACKSON, Republican Counsel GEOFFREY P. GRAY, Republican Senior Professional Staff Member MARK F. OESTERLE, Republican Counsel KATHERINE MCGUIRE, Republican Economist MICHAEL D. THOMPSON, Republican Legislative Assistant JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator GEORGE E. WHITTLE, Editor IRENE WHISTON CARROLL, Assistant Editor FRANK E. WRIGHT, Assistant Editor KEVIN D. HIGH, Assistant Editor (II) VerDate 11-MAY-2000 11:39 Jul 17, 2003 Jkt 000000 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 87708V2.TXT SBANK4 PsN: SBANK4 CONTENTS VOLUME I TUESDAY, FEBRUARY 12, 2002 Page Opening statement of Chairman Sarbanes ........................................................... 1 Opening statements, comments, or prepared statements of: Senator Shelby .................................................................................................. 3 Senator Miller ................................................................................................... 4 Senator Enzi ..................................................................................................... 4 Senator Corzine ................................................................................................ 6 Senator Hagel ................................................................................................... 7 Senator Stabenow ............................................................................................. 7 Senator Bayh .................................................................................................... 8 Senator Carper ................................................................................................. 8 Senator Johnson ............................................................................................... 9 Prepared statement ................................................................................... 55 Senator Schumer .............................................................................................. 10 Senator Dodd .................................................................................................... 11 Senator Akaka .................................................................................................. 56 WITNESSES Arthur Levitt, Chairman, U.S. Securities and Exchange Commission, 1993 to 2000 ................................................................................................................... 14 Prepared statement .......................................................................................... 56 Richard C. Breeden, Chairman, U.S. Securities and Exchange Commission, 1989 to 1993 ......................................................................................................... 16 Prepared statement .......................................................................................... 58 Response to written questions of Senator Hagel ........................................... 94 David S. Ruder, Chairman, U.S. Securities and Exchange Commission, 1987 to 1989 ................................................................................................................... 20 Prepared statement .......................................................................................... 69 Response to written questions of Senator Hagel ........................................... 94 Harold M. Williams, Chairman, U.S. Securities and Exchange Commission, 1977 to 1981 ......................................................................................................... 23 Prepared statement .......................................................................................... 75 Response to written questions of Senator Hagel ........................................... 95 Roderick M. Hills, Chairman, U.S. Securities and Exchange Commission, 1975 to 1977 ......................................................................................................... 26 Prepared statement and exhibits .................................................................... 78 Response to written questions of Senator Hagel ........................................... 95 THURSDAY, FEBRUARY 14, 2002 Opening statement of Chairman Sarbanes ........................................................... 97 Opening statements, comments, or prepared statements of: Senator Gramm ................................................................................................ 98 Prepared statement ................................................................................... 141 Senator Stabenow ............................................................................................. 99 (III) VerDate 11-MAY-2000 11:39 Jul 17, 2003 Jkt 000000 PO 00000 Frm 00007 Fmt 5904 Sfmt 5904 87708V2.TXT SBANK4 PsN: SBANK4 IV Page Opening statements, comments, or prepared statements of—Continued Senator Stabenow—Continued Prepared statement ................................................................................... 141 Senator Enzi ..................................................................................................... 99 Senator Bayh .................................................................................................... 100 Senator Crapo ................................................................................................... 101 Senator Bunning ............................................................................................... 101 Senator Shelby .................................................................................................. 113 Senator Carper ................................................................................................. 113 Senator Akaka .................................................................................................. 114 Prepared statement ................................................................................... 142 Senator Miller ................................................................................................... 128 Senator Corzine ................................................................................................ 129 Senator Johnson ............................................................................................... 142 WITNESSES Paul A. Volcker, Chairman, International Accounting Standards Committee Foundation; Chairman, Arthur Andersen’s Independent Oversight Board; Former Chairman, Federal Reserve System ...................................................... 102 Prepared statement .......................................................................................... 143 Sir David Tweedie, Chairman, International